Diageo and Pernod Ricard go head to head on Chinese whisky

The two spirits giants are locking horns as they battle for consumers in the market for Chinese-made malt whisky.

Pernod Ricard has stolen a march by launching the first Chinese-made whisky product from its Chuan distillery in Sichuan province, production for which began in 2020. For its part, Diageo will complete construction of its own distillery in Yunnan Province later this month.

Both groups are targeting the rapidly expanding market in China for prestige products.

China is already Pernod Ricard’s second largest single market after the US and at a recent presentation to investors Diageo stressed its determination to succeed there in its quest for future growth and profitability.

When launching the Chuan single malt this week, Pernod Ricard’s CEO Alexandre Ricard said the Chinese market is currently “soft, from a contextual point of view”, but he believes the present subdued economic conditions will not change the underlying fundamentals of a growing middle class, allowing room to grow for international-style spirits.

At present there are 26 whisky distilleries in China, with more under construction, but Pernod Ricard’s is the first owned by one of the global liquor giants to launch a home-distilled malt whisky tailored to the Chinese consumer.

It has been priced at 888 yuan per bottle (US$124 or £99). That is a significant marketing strategy as 888 is regarded as a highly propitious number by Chinese consumers.

The whisky market in China is comparatively small, worth about US$1 billion this year according to Statista estimates, and it is predicted to grow by a compound rate of 1.72% up to 2028.

Baijiu remains the staple spirit in China, accounting for 96% of consumption, but Western-produced spirits are gaining traction as the market for baijiu wanes, the primary consumers being the older generations.

While Cognac dominates demand for imported spirits, Bourbon leads the way among whiskey brands, with Jim Beam holding 40% of that sector and Jack Daniels 12%. Diageo’s Johnnie Walker range holds about 5% and Pernod Ricard’s Jameson Irish whisky about 3%.

Ricard has never made any secret of his long-term ambition for the French group to become the largest player in the global spirits market. He sees China as a key stepping stone in that quest.

Pernod Ricard claims that it “leads the way among all international spirits and wines groups with a strong distribution network across the country.”

Key brands such as Martell Cognac, Chivas Regal and Royal Salute Scotch whiskies were introduced into the country more than three decades ago. Since then, they have grown to become China’s leading portfolio of imported spirits.

“The inauguration of The Chuan Distillery is the culmination of a pioneering adventure”, the group says.

“We have blended the natural beauty of the Emeishan landscape with the skill and craftsmanship of our distillers to produce a whiskey to be proud of. It will shape a new and unique experience for whiskey enthusiasts for many years to come.”

The Chuan single malt is distilled from both European and Chinese barley and is matured in three types of oak, some sourced locally plus Bourbon casks from America and Sherry casks from Spain.

Diageo already promotes its Scotches in China through three prestige Johnnie Walker Houses in Beijing, Shanghai, Chengdu.

Pernod Ricard will follow the example through The Chuan Malt Whisky Distillery Experience Centre, based in the grounds of the distillery.